How to compare credit cards – features & benefits
Evaluate the Features and Benefits before Signing Up
Comparing credit card rates and other features can be a long and tough job. Most of the time people may not bother and just go for the one with an exciting offer. But, taking the time to compare credit card rates can be worth in the future especially, in the long run. There are many things to consider before signing up. Points like where you shop, spending and repayment on a monthly basis will help you a lot. The following points are helpful.
Cost is the most important point to consider. It is important to look at the cost and compare it with the repayments based on family budget. Normally we consider cost as annual card fee and service fees, but it includes the entire fee that you’ll pay on purchases, advances and balance transfers.
Low Fee and Higher Interest
There are some credit cards that have a lower annual fee, but the interest rate on purchases is higher. If, you are able to pay off your card’s closing balance fully on the due date then you can save some money on these cards. A careful comparison of fee and interest rate can give you clear picture.
Low-Interest Rate Credit Cards
The purchase interest rate associated with these cards is lower, but cash advance interest rate is higher. Careful evaluation of the cost of the annual card fee and interest-free period is needed.
Other Cost Factors
There are many other factors that affect the cost of a credit card. Compare and evaluate factors like late payment charges, going beyond the limit, replacement fees and overseas use of the card. All these factors play a vital role in credit card rates.
Things to Keep in Mind Before Signing Up
After careful evaluation you need to keep the following points in mind.
Your spending habits play a vital role in the selection of credit card. How you intend to use the card is the first question that needs to be answered. There are two situations i.e. paying off the credit card every month without fail or carrying some balance from month to month. You can use it for payment of everything or you can use it for just emergencies.
- If you have the intention to use your card for payment of the bill in full every month, the interest rate is then meaningless for you. The best choice is to look for a card with zero annual fees and a longer grace period to avoid a finance charge.
- If you are going to carry a balance, the best option is to go for the lowest possible interest rate as well as low introductory rate.
- If you are going to exercise your card for most of your buying, then go for a card with a generous credit limit and exciting reward program.
- If the plan is to use a credit card for just emergencies, then go for a no-frills credit card with the lowest fee and minimum interest rate.
There are countless options. Just select the card that satisfies your requirements in terms of low charges.
Annual Percentage Rate
Annual percentage rate is actually the interest rate that tied with credit card rate. The APR can either be fixed rate or variable rate. The fixed rate is the one that you know in advance while variable rate fluctuate and you don’t know about in advance. There are certain triggers that can change the fixed rate such as late payment or going over the limit. In the case of changing your card can also change fixed rate. So, keep all these in mind before going for a credit card.
Credit limit and Credit Score
The credit limit is the amount that you are authorized to borrow with the permission of credit card issuer. You can borrow from few hundred dollars to tens of thousands of dollars. The amount of borrowing depends upon your credit history and credit scoring. Credit worthiness can help you in the long run. In case you hurt your credit score you can lose certain benefits. Some credit card issuer cut your credit limits. You can also face a penalty in certain cases. So, it is important to maintain good credit score to gain maximum benefits.
Fees and Penalties
The core objective of every credit card issuer is to make money off you. Certain charges are common with every card, like balance transfer fee, cash advances fee, fee against an increase in credit limit or charges against payment by phone. You can face penalty charges in case you pay your bill late or going over the credit limit. The credit card issuers don’t decline your card but just sock you with the extra amount as a fee. It is important to choose a card with reasonable fees. There are, for example, cards that provide you with free of cost balance transfer transaction. Similarly, look for a card that offer zero percent interest for at least 12 months. Before you agree to accept a card, it is important to carefully analyze the entire terms and conditions in order avoid unwanted situation later.
Balance Computation Procedure
Balance computation procedure is important to consider especially if you are interested in carrying a balance. Most card issuer uses average daily balance method. In this method, the entire daily balances are added and then divided by the entire number of days in the billing cycle. Some credit card issuers apply two billing cycle. In this case you need to pay more money in financing fees so, stay away from such credit cards.
Many card issuers offer exciting reward programs to attract new customers. Make it sure to take maximum benefits from such offers. Look for a reward program that offers flexibility like cash or travel. A good reward program is the one that you can use, easily earned and redeemed.
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